Applications for Northbound Travel for Hong Kong Vehicles are increasingly on the rise as cross-border travel becomes more convenient and flexible. Yet motorists must be cognizant of whether their vehicle insurance coverage offers adequate protection in case of a traffic incident. The Consumer Council has examined relevant information from 12 local insurance companies that insure Unilateral Recognition products including the mandatory top-up cover of the Mainland Compulsory Traffic Accident Liability Insurance for Motor Vehicles (“Compulsory Motor Insurance”), and the selective top-up cover of the Mainland Commercial Insurance for Motor Vehicles (“Commercial Motor Insurance”). It was revealed that Compulsory Motor Insurance offered by the surveyed insurance companies had a limit of indemnity of RMB200,000 per incident, which is the statutory minimum requirement in the Mainland. However, the annual premiums varied by nearly 40% among companies.

Since the limit of indemnity under the Compulsory Motor Insurance might not be sufficient to cover full liability, the Council advises motorists to seriously consider purchasing additional “Commercial Motor Insurance – Third Party Liability” to augment their protection. It is worth noting that “Third Party Liability” coverage is different between the Mainland and Hong Kong, since in the Mainland such coverage does not include passengers on board the vehicle itself. If a motorist wishes to increase protection for himself/herself and the passengers, an additional “Commercial Insurance – Persons on Board Liability” should be purchased. However, relevant insurance products of this survey only offered a limit of indemnity of RMB200,000 per incident per person on board, which might not be adequate. Hence the Council hopes that the insurance industry, relevant regulatory bodies and Government departments would expedite the enhancement of Unilateral Recognition insurance products currently available in the market, and devise more comprehensive top-up cover with higher limits of indemnity, to provide more choices for consumers.

The Council made reference to the list of insurers offering Unilateral Recognition products on the website of the Hong Kong Federation of Insurers and selected 12 companies contained therein for further examination of information from their official websites regarding their Compulsory Motor Insurance and Commercial Motor Insurance products. A questionnaire was sent to each of the selected insurance companies to seek more detailed information on such products. 2 of the insurance companies did not respond fully and thus the Council contacted them acting in the capacity of a consumer for further enquiries.

Compulsory Motor Insurance – Same Coverage but Premiums Varied by Nearly 40%

Before obtaining a licence from the Mainland authorities, a consumer must have first purchased a valid Compulsory Motor Insurance. Under the Unilateral Recognition policy, during the validity period of the Hong Kong motor insurance policy, applicants can add a Unilateral Recognition insurance policy that is equivalent to the Compulsory Motor Insurance. The whole policy will be issued by the same Hong Kong insurance company, so that the applicant can save the hassle of purchasing policies from both places separately.

The survey found that the coverage of Compulsory Motor Insurance offered by the 12 insurance companies was identical, protecting against third-party personal bodily injuries or death (limit of indemnity of RMB180,000), medical expenses (limit of indemnity of RMB18,000), and property loss (limit of indemnity of RMB2,000), with total limit of indemnity equals RMB200,000 per incident, being the Mainland’s statutory minimum amount. However, the insurance premiums had considerable variance. The premium of Compulsory Motor Insurance is generally based on the number of seats in the vehicle including the driver’s seat, with 2 types of fees, classed as less than 6 seats and 6 to 8 seats. Excluding 1 insurance company that did not separately list the premium for Compulsory Motor Insurance on its official website, the premiums for Compulsory Motor Insurance for less than 6 seats among the other 11 insurance companies ranged from $832 to $1,159 per annum, while that for 6 to 8 seats ranged from $963 to $1,342 per annum, with a variance of about 40% among companies for both types of fees.

Recommend Purchasing Commercial Motor Insurance but Be Aware of Differences in Definitions Between “Third Party Liability” and “Persons on Board Liability”

Consumers should be mindful that although the purchase of Compulsory Motor Insurance would comply with the statutory minimum requirement in the Mainland, in the event of a traffic incident, the scope of the coverage and limits of indemnity might not be sufficient to cover all liabilities. Therefore, consumers are advised to seriously consider purchasing the non-mandatory Commercial Motor Insurance, including “Third Party Liability” and “Persons on Board Liability”, for more comprehensive protection. Among the 12 surveyed insurance companies, 3 required consumers to simultaneously take out a “Commercial Motor Insurance – Third Party Liability” policy when purchasing Compulsory Motor Insurance.

When purchasing Commercial Motor Insurance, some local consumers might adopt the concept of Hong Kong’s “Third Party Insurance”, and mistakenly think that purchasing “Commercial Motor Insurance – Third Party Liability” would already cover all passengers on board. In fact, “third party” in the context of “Commercial Motor Insurance – Third Party Liability” refers to those who suffer bodily injuries, death or property loss that was caused by the insured vehicle, excluding passengers on board and the insured motorist. If a motorist wishes to augment the protection for himself/herself and passengers on board, the additional purchase of “Commercial Motor Insurance – Persons on Board Liability” is needed.

With respect to “Commercial Motor Insurance – Third Party Liability” products offered by the 12 surveyed insurance companies, the insured amounts ranged from RMB 1 million to RMB 10 million, representing 5 to 50 times the minimum statutory requirements of Compulsory Motor Insurance. There were 4 companies that provided insured amounts of RMB 10 million of “Commercial Motor Insurance – Third Party Liability” products. Even though the insured amounts were the same, different insurance companies charged different premiums and the variance is more obvious than that of Compulsory Motor Insurance. From the survey, citing as an example the more common insured amount of RMB 2 million, excluding 1 insurance company that did not provide the pertinent information, of the 10 insurance companies that had provided the option of this insured amount, the premiums ranged from $1,009 to $1,666 per annum for vehicles with less than 6 seats, and from $1,194 to $1,941 for vehicles with 6 to 8 seats. The premiums varied by more than 60% for both types of vehicles. Assuming a consumer is driving a vehicle with less than 6 seats and has purchased Compulsory Motor Insurance and “Commercial Motor Insurance – Third Party Liability” with the insured amount at RMB1 million, the annual premiums charged by different insurance companies could vary by as much as nearly $800, a difference of nearly 50%.

Be Aware of Significant Discrepancies in Insured Amount of “Persons on Board Liability” Maximum Limit of RMB200,000 Per Seat

With respect to “Commercial Motor Insurance – Persons on Board Liability”, this insurance product charges fees according to the number of seats in the vehicle, with premiums ranging from $23 to $467 per seat per annum. From the survey, the most common insured amount was RMB10,000 per seat, with 10 insurance companies providing such a product. The highest insured amount was RMB200,000 per seat, but only 1 surveyed insurance company provided such a product.

The vast majority of insurance companies required the policyholder to take out “Persons on Board Liability” policies for the driver’s seat as well as passenger seats, whilst 2 companies allowed insuring the driver’s seat only. Although this allowed for more flexibility, it would also weaken the protection for passengers. If a traffic incident occurs, it might increase the liabilities solely borne by the driver towards his/her passengers. The insured should carefully assess the potential risks of purchasing “Persons on Board Liability” for the driver’s seat only. Consumers should also bear in mind that, as revealed in this survey, when purchasing “Persons on Board Liability” insurance for passenger seats, it must be done for all passenger seats and not individual passenger seats. Using a 5-seater vehicle as an example, excluding the driver’s seat, even if there are fewer than 4 passengers, all 4 passenger seats must be insured to avoid any doubt or argument in the event of a claim settlement.

Advocating Improvement of Existing Unilateral Recognition Insurance Products

Considering that the limit of indemnity of Compulsory Motor Insurance is just RMB200,000, and that Commercial Motor Insurance is a non-mandatory product, if a motorist has not purchased Commercial Motor Insurance, in the unfortunate event of a traffic incident, merely relying on the Compulsory Motor Insurance might not be sufficient to cover all liabilities. From the survey results, coverage amounts of “Third Party Liability” and “Persons on Board Liability” insurance policies under Unilateral Recognition had much leeway to be raised. Therefore, the Council hopes that the insurance industry, relevant regulatory bodies and Government departments would expedite the development of existing Unilateral Recognition insurance products, and actively consider offering more diversified motor insurance products with higher insured amounts, in order to provide more choices for consumers who wish to have more comprehensive protection.

Apart from information on the purchase of motor vehicle insurance, consumers driving northbound to the Mainland should also pay attention to the following:

• Consumers driving northbound should purchase motor vehicle insurance in advance, and check whether the relevant permits and insurance policies are valid before departure;
• Keep record of the insurance company’s contact information, relevant terms and conditions, and claims requirements before departure. In the event of an accident, in addition to calling the local traffic accident hotline in Guangdong Province to report the case, consumers should also contact the claims agency as soon as possible for filing the report, and check with their insurance company for follow-up and procedural details upon returning to Hong Kong;
• Due to differences between the Mainland and Hong Kong in terms of road design, traffic regulations, driving directionsand road signs, etc., consumers are advised to plan their itinerary and driving routes well in advance;
• Mainland traffic regulations allow vehicles, under certain circumstances, to make a right turn when the traffic light is red and the pedestrian crossing light is green. Therefore, both motorists and pedestrians should pay attention to the road conditions;
• Those driving electric vehicles are advised to bring along suitable charging adapters and other accessories.

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